McMahon on Congress and the Income Tax, 1861-1918

Stephanie Hunter McMahon examines the debate that took place in Congress over the purposes of the United States's enactment of a federal income tax from the nation's founding through World War I. From a study of the federal income tax's development, it is clear that once the first income tax statute was enacted during the Civil War, it remained one of the fiscal tools considered by policymakers but, more importantly, entered into their rhetorical and political repertoire. While some scholars conclude that the adoption of this legislation was the result of progressive forces, Congress never intended the income tax to establish a pervasive system of income redistribution or to substantially reduce accumulated wealth. But neither, as other scholars suggest, was the income tax merely a defensive measure, a means to preserve the status quo and to protect the elite from more radical class legislation. Rather, this paper argues that the income tax was quickly recognized by early legislators as securing rhetorical benefits independent of the income tax's economic effects. It was those benefits of the statute that ensured the tax's repeated enactment. After the income tax had been used once, policymakers understood that advocating the income tax conveyed sympathy with certain elements of the reformist agenda, most notably that of redistributing the balance of the federal tax burden, and that being seen as sympathetic to this agenda had political value even if Congress had no desire to legislatively require the redistribution of wealth in practice. Knowing these objectives gives legal scholars a clearer understanding of some of the purposes and constraints of our nation's legislators and, ultimately, a powerful tool for construing individual statutes themselves.

Posts on another recent SSRN papers by Professor McMahon on the history of taxation is here. Image credit: Oscar Underwood.